Investors with €5bn to spend eye up Irish rental sector

While not the panacea to housing crisis, ‘build to rent’ funded by foreign investors has potential to build scale quickly

International investors still see potential in Irish rental market. Photograph: Eric Luke / The Irish Times

International investors with €5 billion are now targeting the Irish rental sector a new report suggests, which points to “considerable interest” from European, Canadian, UK and US investors.

In a new analysis by CBRE Research of the so-called “build-to-rent” sector, which comprises the development of properties specifically for the rental market, the authors note that the sector has been “gathering pace” in the last 12 months, fuelled by economic and demographic fundamentals and “a notable supply demand imbalance” in the residential rental sector in cities such as Dublin, Cork and Galway.

The build-to-rent sector has come out of nowhere in Ireland; between 2012 and 2017 it accounted for an average of less than 9 per cent of total investment in Ireland. But in the first half of 2018, it accounted for a “phenomenal” 25 per cent of investment, with over € 500 million of residential assets traded in the period. Examples in the sector include Ires Reit’s construction of 68 units at The Maple in Sandyford and Kennedy Wilson’s Clancy Quay development, which will have almost 900 units when completed.

While to date, build-to-rent has been predominantly Dublin based, the report suggests that “as investors get increasinglycomfortable with economic and demographic drivers in the Irish market and familiar with the yields prevailing in cities outside Dublin”, we will see more activity outside of the capital.

Given the much publicised housing shortages, CBRE says that build to rent is “clearly not the panacea to Ireland’s housing crisis”, but, when combined with other measures, “it has the potential to deliver scale quickly and provide high quality rental accommodation for the increasing cohort of our population that opt to rent residential accommodation.”

Money to spend

The report also highlights the amount of money that is available to spend in developing the sector further, noting that the volume of institutional equity targeting the residential investment sector in Ireland now exceeds €5 billion, with “considerable interest” from European, Canadian, UK and US investors

About a third of this capital comes from European investors, with 21 per cent from Irish investors, a further 15 per cent from Canadian investors, 14 per cent from the UK, 10 per cent from the US and 8 per cent from the Middle East.